Venezuela’s crude oil production

Venezuela is OPEC’s eighth-largest crude oil producer. The U.S. Energy Information Administration estimates that Venezuela’s crude oil output decreased by 65,000 bpd (barrels per day) to 1,360,000 bpd in June—compared to the previous month. The production is near a 16-year low.

The drop in production and exports has been supporting oil prices since July 2017. Brent and WTI oil prices increased 0.5% and 0.9%, respectively, on July 24. The iShares US Energy ETF (IYE) rose ~1.24% to $41.63 on July 24. The index is composed of US companies in the energy sector. Pioneer Natural Resources (PXD), Continental Resources (CLR), Oasis Petroleum (OAS), and Nabors (NBR) rose 3.23%, 2.63%, 2.6%, and 2.3%, respectively, on July 24. These stocks were the top percentage gainers in IYE’s holdings. These stocks account for ~2.6% of IYE holdings.

Venezuela’s production

Venezuela’s oil production has dropped 60% or by ~2.04 MMbpd (million barrels per day) from the record high in December 1997. Venezuela’s production has declined by 820,000 bpd or 38% in the last two years.

Relatively low global crude oil prices, high debt, a lack of investment in crude oil exploration and production activity, electricity outages, port congestion, and high inflation weighed on Venezuela’s oil industry. Replacing technical people with a military commander to run PDVSA and mass employee resignations have also weighed on the country’s oil industry.

Impact

Venezuela’s president aims to increase the country’s crude oil production by 1 MMbpd from the current production of 1.36 MMbpd. China Development Bank is expected to invest more than $250 million to boost Venezuela’s crude oil production.

However, Venezuela’s crude oil production could fall by 1 MMbpd, according to Bloomberg. High debt and mismanagement of Venezuela’s oil industry could lead to lower production. A decline in Venezuela’s production would support oil prices.